It is the fourth highest level set by the Joint Terrorism Analysis Centre and the Security Service (MI5).
Home Secretary Priti Patel confirmed the change on Twitter but described it as a "precautionary measure" and "not based on any specific threat".
She added: "The public should continue to remain vigilant and report any suspicious activity to the police."
There are five levels of threat:
low - an attack is highly unlikely
moderate - an attack is possible but not likely
substantial - an attack is likely
severe - an attack is highly likely
critical - an attack is highly likely in the near future
The threat level indicates the likelihood of a terrorist attack in the UK.
ITV News Security Editor Rohit Kachroo explains the latest developments
Ms Patel said: "The British public should be alert but not alarmed. This is a precautionary measure following the terrible incidents we have seen in France last week and the events that we saw in Austria last night.
"The first and most important duty of the Government is to protect the British public and we will continue to do that through the measures and the tools that we've put in place in terms of dealing with terrorism and terrorist activity."
She added if the public have any concerns, they should report them to the police.
"The public will see more visible policing across the country," she said. "And that is right in light of the threat going up."
Downing Street said the potential for putting in additional protections against possible terror attacks in the UK was not discussed at Tuesday’s Cabinet briefings.
Asked whether the UK would be putting in additional measures before Wednesday, the Prime Minister's official spokesman said: "We are acutely aware of the threat that is posed by terrorism and our police and security services are always working around the clock to keep us safe."